Many people earn lakhs of rupees through Long Term Capital Gains (LTCG) by investing in the stock market. These gains are taxable. If you also want to save tax by buying a new house with this money, then this information is beneficial for you. Suppose Sujit Pandey, who lives in Noida, has earned capital gain by selling shares. He already owns a house and now wants to buy another one. He wants to know if he can use this capital gain to buy a new house and claim a tax exemption on it. Let us know the answers to these questions from Mumbai’s well-known tax expert, Balwant Jain.
Tax exemption under Section 54F
According to tax expert Balwant Jain, any individual or Hindu Undivided Family (HUF) can claim exemption under Section 54F on long-term capital gains from selling a property (except a residential house). But there are some conditions for this. You have to use this capital gain to buy or build a new house within the stipulated time.
If you buy a ready-to-move-in house, it must be purchased within two years of selling the share. If you build your own house or buy an under-construction house, the construction must be completed within three years from the date of selling the share. If you bought the house a year before selling the share, you can still avail this exemption.
Limit of ₹ 10 crore for exemption
Balwant Jain said that a maximum limit of ₹ 10 crore has been fixed for this exemption. This means that you cannot claim exemption under section 54F on investments of more than ₹ 10 crore. If you are unable to use the amount on which you want to claim exemption by the last date of filing the income tax return (September 15 this year), then you will have to deposit it in a bank account opened under the ‘Capital Gains Account Scheme’. By doing this, you will remain entitled to the exemption. The amount deposited in this bank account can be used later to buy a house within the stipulated time limit.
Benefits will be available even if you already have a house
The most important condition is that the exemption under section 54F can be claimed only if the taxpayer does not have more than one house in his name (except the house you are going to buy). Since Sujit Pandey already has only one house, he can claim tax exemption under section 54F on the capital gains made by selling shares. This rule is a big relief for all those people who already have a house and want to buy another house by investing.
